FIND IT, FILE IT, FLOG IT: PHARMA’S CRIPPLING ADDICTION AND HOW TO CURE IT

Chapters 4: New Business Models & Therapies Appear

Nov 29, 2022

∙ Paid

Leavers and funders join forces

This mass divestment of assets resulted in the formation of business models that were not feasible when the Big Pharma companies owned the assets. The management teams in the new contractor base were under enormous pressure to survive beyond the initial contract period that their former employers gave them, typically five years. The search was on for new business, and this coincided nicely with newly “released” Big Pharma executives looking for opportunities and investors looking enviously at the returns that marketed drugs were providing for their owners.

From this marriage made in heaven, biotech companies were conceived. The idea behind biotechs appeared attractive. By assembling an executive team and a core staff of scientific and technical experts, the companies could complete all the activities of drug development without actually owning any of the “hardware.” All a biotech needed was the purchase of the appropriate mix of clinical and nonclinical contractors to do the heavy lifting of drug development (File It).

The cash to pay the contractors would come from the investors keen to make a return on their money. This model was further extended into what became known as “virtual pharma,” where the team of core experts was whittled down to a bare minimum, many of them comprising little more than ten or twenty people, often reliant on contractors to educate them in the niceties of drug development and the regulations.

This was considered acceptable because their mission would be to move the process to the point where the compound could be sold to bigger companies, or the entire company purchased en bloc by a suitor with the necessary resources to move things on towards marketed products.

Generic companies pick up the scraps

The dropping of drugs when out of patent also resulted in new companies willing to work to much smaller margins by copying the original product that they had been prevented from doing under patent law. The Big Pharma companies seemed more than happy to abandon that piece of the market. These newly christened generic models did not have to go through the extensive clinical trials of patented drugs and therefore did not have to recover the costs of failures. The extent of the clinical research required of them was to prove that their copy was bioequivalent. That is, they had to prove the effect of the drug on the patient was equivalent (within an acceptable band) to the original drug.

The regulators established the rules for the clinical trials required. These companies received a welcome boost when the US Congress passed the Hatch-Waxman Act in 1984, actively encouraging the entry of generic into the market. The intention was to force down drug prices. Other countries, such as the United Kingdom, also made moves to ease the entry of generic, establishing requirements for generic substitution whenever possible.

Generic companies supply the vast majority of prescription medicines sold around the world today.

Others pile in

As time has marched on, companies large, small, mini, and micro are now involved in developing and supplying medicines. As university spin-offs and start-ups have entered the fray, we now have an interesting mix of business models:

Pharmaceutical innovator
Biopharmaceutical innovator
Generic
Biosimilar
biotech
virtual
speciality Pharma
university spin-off
start-up

The models deal in conditions ranging from mildly irritating to life threatening and terminal. To add to the models, we have breakthroughs in treatments of diseases.

Biologics lead the way to new therapies

In recent years, new classes of compounds have begun to emerge, namely biologics (or biologicals) and advanced therapy medicinal products.

INSIDE PHARMA